Being specific — especially attractive
By Manual Greenland, Senior Portfolio Manager, Australia
03 August, 2016
We recently added two software companies to our Australian portfolios. Aconex provides a project management solution for complex construction developments. Wisetech's solutions reduce costs, better manage risk and maximise efficiency for freight forwarders. Their focus on specific industries makes these companies especially attractive.
Greater focus delivers a better product. Rather than seeking to design a 'one size fits all' solution, Aconex and Wisetech focus on providing solutions specific to the industries they serve. Both companies' products evolve in response to their clients' needs and feedback.
An industry focus drives faster software adoption rates. Once key industry players start using the software, others must quickly follow to remain competitive. Leading logistics company DHL recently adopted Wisetech's software; in future other freight companies seeking to work with DHL would benefit from using the same software. Similarly Exxon Mobil has begun using Aconex's solution for its complex oil and gas projects; any companies working on Exxon Mobil's projects will also have to use Aconex's software. Aconex and Wisetech can rely on this network effect to drive adoption of their software, allowing them to grow rapidly and spend less on marketing.
Industry specialisation makes for stronger client relationships. Both Aconex and Wisetech software is core to their clients' businesses. For a client to switch to a different solution would be costly and risky, making clients reluctant to move to competitors. Most of Wisetech's impressive revenue growth has come from selling more to its customers as relationships have deepened. By capturing all construction project data, Aconex provides one essential version of the truth for everyone working on a specific project. Both companies' software is mission critical for their clients.
Accounting software specialist Xero has shown how focusing on one industry can deliver high growth rates and sector leadership. Early wins in their sectors make Aconex and Wisetech similarly promising.